How much extra state pension you will get if you delay claiming it

If you delay claiming your state pension by a year or two you could end up much better off in retirement.

Official data suggests almost one in ten people entitled to draw their state pension do not do so immediately, while 14,000 pensioners have suspended their payouts. In return, they receive a higher pension when they do make a claim for the first time or go back to claiming.

Pension experts had expected the number of people deferring their state pension to fall sharply after a change in the rules in 2016 made it less attractive to do so. Before April 2016, you got a 10.4% increase in your pension for every year you delayed taking it, but this has now come down to 5.8%. The change means you need to live for 17 years once you start taking the money to get more overall than you would have done by claiming it straight away; previously the break-even point came after only nine years or so. 

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

However, there’s another complication to think about. The number of people working on past retirement age is now at a record high. For many of these people, a state pension of around £9,000 a year on top of their earnings pushes them into a higher tax bracket. By deferring their pension until they stop working, they’ll pay less marginal tax today – and may pay no tax at all on their state benefits when they do start claiming.

The maths will depend on your circumstances, but if you’re working, the beneficial effect of lower taxes could reduce your breakeven point from deferring your state pension. It’s certainly worth considering.



Personal finance

Companies cut back on their pensions bills

Britvic is the latest firm hoping a cheaper inflation index will cut pension costs. David Prosser reports.
28 Aug 2019

Good news for pensions savers from HMRC

HMRC has withdrawn its appeal over breaches of the pensions lifetime allowance.
28 Jun 2019
Personal finance

Don’t miss the pensions deadline

There are just five weeks left in the 2018-2019 tax year, so make sure you’ve made full use of your allowances.
6 Mar 2019

Have you been paid too much pension by mistake?

If your pension provider messes up and pays you more pension than you’re entitled to, you will almost always have to give it back. However, there are …
27 Feb 2020

Most Popular


Will coronavirus kill off the bull market?

It seems clear now the coronavirus will at some point go global. And when it does, will it bring down the stockmarket’s bull market? John Stepek looks…
27 Feb 2020

Gold, coronavirus, and the high cost of face masks in northern Italy

The price of gold is spiking – as it always does in a global panic. But this bull market predates the coronavirus epidemic, says Dominic Frisby, and w…
26 Feb 2020

What to look out for as panic over coronavirus spreads

Markets have started to get properly worried about the coronavirus outbreak. And it’s not just stocks, says John Stepek. Here’s what you should be kee…
28 Feb 2020

Why investors shouldn’t overlook Europe

SPONSORED CONTENT - Ollie Beckett, manager of the TR European Growth Trust, tackles investor questions around Europe’s economic outlook and the conseq…
6 Nov 2019